Michael Bordellent is the proud owner and pilot of Bordellent Air Services Pty Ltd The company flies
Question:
Michael Bordellent is the proud owner and pilot of Bordellent Air Services Pty Ltd The company flies a daily round trip from the Great Lake Area to a resort in Seychelles In 2018, the company reported an annual income before taxes of $120,403, although that included a deduction of $70,000 reflecting Michael’s “salary.”
Revenue ($360 × 1,248 passengers) $449,280
Less costs:
Pilot (owner’s salary) $ 70,000
Fuel (35,657 gallons × $4.15) 147,977
Maintenance (variable) 127,920
Depreciation of plane 25,000
Depreciation of office equipment 2,800
Rent expense 40,000
Insurance 20,000
Miscellaneous (fixed) 7,500
441,197
Income before taxes $ 8,083
Revenue of $449,280 reflects six round trips per week for 52 weeks with an average of four passengers paying $360 each per round trip (6 × 52 × 4 × $360 = $449,280). The flight to the resort is 400 miles one way. With 312 round trips (6 per week × 52 weeks), that amounts to 249,600 miles. The plane averages 7 miles per gallon.
Required (Round all monetary calculations to the nearest cent and all trips to the nearest whole trip.)
a. How many round trips is Michael currently flying, and how many round trips are needed to break even?
b. How many round trips are needed so that Michael can draw a salary of $110,000 and still not show a loss?
c. What is the average before-tax profit of a round trip flight in 2010?
d. What is the incremental profit associated with adding a round-trip flight?
University Physics With Modern Physics
ISBN: 978-0073513881
2nd edition
Authors: Wolfgang Bauer, Gary Westfall